If you own a leasehold property, or if you are considering to buy one and you want to know if it’s hard to sell a leasehold property, there are a number of things to consider, as leasehold properties are different to freehold properties.
It is a little harder to sell leasehold property vs freehold property as leasehold properties have annual service charges and ground rents to pay, making them less attractive. Also, the remaining lease term affects its saleability, and if this is under 80 years it will be harder to sell.
A leasehold property is a property that is owned for a fixed period of time. When you buy a leasehold property your ownership includes a legal agreement with the landlord or freeholder, which contains the conditions of the lease and the lease term. Most flats and apartments are leasehold properties.
Can you get a mortgage on a leasehold property?
You can get a mortgage on a leasehold property provided the lease has at least 70 years left to run, but the shorter the lease, the more difficult it is to get a mortgage. Mortgage lenders don’t only take account of the remaining lease term, but also consider the other terms contained in the lease.
Selling a leasehold property timescale
The timescale for selling leasehold property is around 6-8 weeks once an offer is accepted, but this timescale increases if it’s not a chain-free sale or if there are complications during the conveyancing process. The strength of the property market will affect how long it takes to receive an offer.
What can make it harder to sell a leasehold property?
There are a number of factors that can make it harder to sell a leasehold property, which include:
Remaining term on the lease: Leasehold property becomes much harder to sell once the remaining term on the lease falls below 80 years. The lease term can be extended by serving a Section 42 Notice on the freeholder, but the shorter the lease, the more expensive this becomes.
Service charges: The level of service charge can put potential buyers off from buying a leasehold property. The service charge is to cover for repairs, maintenance, utilities and other costs for the common parts of the apartment building.
Ground rents: Ground rents can put some buyers off from buying a leasehold property, but often times with more modern flats and apartments the ground rent is usually less and £200 per year. But on the other hand some lease agreements ground rents double every few years, which can make a leasehold property impossible to sell.
Restrictive covenants: Most leases include restrictive covenants, which can put some buyers off from buying a leasehold property. Lenders are also interested in the restrictive covenants too, as they need to know the property is good security for the mortgage, and some covenant restrictions can be damaging to a property’s value.
Type of property: Most leasehold properties are apartments and flats which attract a certain type of buyer. Buyers of leasehold properties tend to be first time buyers and property investors, which can limit the market and make it harder to sell.
Subletting clause: Most leases have a sub-letting clause, which governs if you can sub-let the property, and if you are able to sub-let whether you have to pay a sub-letting fee to the freeholder.
Service accommodation restrictions: Many leasehold flats and apartments have leases that prevent them from being used for serviced accommodation or let out using Airbnb.
Slow acting freeholder: During the conveyancing of a freehold property your conveyancing solicitor will need to liaise with the freeholder or the freeholder’s solicitor. If the freeholder is slow at responding to your solicitor, this will slow down the sales process.
Condition of the building: As a leaseholder you are not responsible for the outside of the building, nor for the entrance to the building and the corridors to the individual flats. This is the responsibility of the freeholder, and this is paid for out of the service charges. If the freeholder is bad at keeping the building in good condition, this will make it harder to sell the property and it will also affect its market value.
Pets are often not allowed: Many leasehold properties, and especially leasehold flats and apartments don’t allow owners to have pets like cats and dogs. So this cuts down the size of the market by those who have pets.
How long are leases on leasehold properties?
The majority of leases begin with a 99 year lease term, but in recent years lease terms are starting with 125 years or even for 999 years. These longer 999 year leases are almost freehold in nature, as the term will outlast most owners.
How you sell a leasehold property
Selling a leasehold property is no different to selling freehold property, as you first appoint an estate agent to sell the property, and once an offer has been accepted, you engage a conveyancing solicitor to affect the sale.
I hope you’ve enjoyed this article about is it hard to sell a leasehold property
f you’ve enjoyed this article about “is it hard to sell a leasehold property” please share it on your favourite social media site.
Also, if you have any questions, please feel free to comment below too. Please also share any of your experiences with properties you’ve bought. Alternatively, if you need more help, please feel free to contact us on our contact us page here. Or join the discussion and ask your question in the property forum.
Is It Hard To Sell A Leasehold Property? Timescale to Sell
Why Would Anyone Buy A Leasehold Property: 10 Reasons Why The reason why people buy leasehold property is they tend to be cheaper than freehold properties and it's a way for first time buyers to get on the property ladder. Many…
What Are The Disadvantages Of Buying Leasehold Property? The main disadvantages of buying leasehold property include paying service charges and ground rents, which can be very costly and you have no control over. But also, owners of leasehold…
Are Ex-Council Houses Freehold Or Leasehold? Most ex-council houses are freehold properties, which means you’ll have permanent and absolute tenure over the land and property included on the title plan, which means you will have freedom…
Article written by Russell Bowyer who has been investing in property since purchasing his first commercial property in the 1990's for his own Chartered Accountancy business. But his first property investment project was to turn an old dilapidated restaurant into a large 5-bed home, which he purchased for £117,500 and sold for £450,000 (to see an "after" photo of the house before it was sold see here: About). Russell owns a number of investment properties, which includes houses, flats and HMO's. More recently he has turned his creative side to investing in property using lease options. His largest lease option deal to date was to acquire 12 properties worth over £2 million for just £12, which means he paid just £1 to acquire each property!
